Downturn eats away at restaurants

The weakening economy has taken a bite out of the dining industry, with local restaurateurs saying they get a pit in their stomachs every time they take a look at the books.

The cost of ingredients and freight has forced many to revise their menus and think up new ways to promote their eateries.

All across the country, the outlook became much grimmer in September, according to the National Restaurant Association, which marked a record low in its comprehensive index of restaurant activity.

Restaurant owners have continued to report sagging sales over the past 11 months, according to the association, with September representing the worst result in more than five years. When polled, about 60 percent of restaurant owners said their sales had declined.

Along with weak sales, the number of customers eating out has decreased significantly. About 66 percent of restaurants nationwide had fewer customers in September.

In and around Annapolis, restaurants are suffering a similar fate. Even established eateries like Cafe Normandie on Main Street are facing hard times.

Owner Jean Louis Evennou said in the 22 years he has operated downtown, business has never taken this much of a nosedive.

"I think it's never been as bad as this," Mr. Evennou said. "This has really been the lowest."

Since the economy took a downturn, Mr. Evennou said Cafe Normandie, which offers Chesapeake Bay seafood-inspired French cuisine, has taken about a 20 percent hit. He and his wife, Suzanne, who both work in the restaurant, had to lay off their sous chef some months ago to cut expenses. Mr. Evennou, who at 60 years old would like to start scaling back his hours for retirement, said he works 70 to 80 hours a week and doesn't see that changing any time soon.

"If I could go to a 50-hour week, that would be great," he said.

Mrs. Evennou said even costs unrelated to the food, like their Baltimore Gas and Electric Co. bills, are taking a toll on business. They spend about $5,000 per month on energy for the small downtown restaurant, she said. And though one of the novelties of the restaurant is the large fireplace in the center of the dining room, the couple has made a business decision never to light a fire unless the temperature outside drops below 40 degrees.

But they are thankful that they don't have to contend with soaring electric bills from running the air-conditioning.

"BGE almost killed me this summer," Mr. Evennou said.

Mr. Evennou said one change they've made as a result of rising food prices has been to charge $2.50 for their breadbaskets, rather than serving them complementary.

"The bread, we have always baked our own bread," Mr. Evennou said. "But we were sort of forced to start charging because wheat prices went up so high."

On the whole, Mr. and Mrs. Evennou estimate that the prices of their ingredients have all gone up about 7 or 8 percent in the past year.

But Mr. Evennou has become creative with his marketing, he said. He's offering occasional cooking classes, wine-paired meals, T-shirts with the restaurant logo, and, his most recent idea, a mascot. Mr. Evennou purchased a costume called "Chef Pierre," which he plans to have someone wear while walking up and down the sidewalk to get people interested in stopping inside for the fare.

"I love doing promotions, and I love my place," he said. "We're just trying to do everything we can to get back on track."

Most restaurant operators share that sentiment and are rethinking where they should save and where to spend. Restaurant Association of Maryland President and CEO Paul Hartgen calls the state's restaurant scene a "challenging" economic climate.

"As an industry, Maryland restaurants are feeling the tightening economy as much, if not more, than other businesses and consumers," Mr. Hartgen said in a recent press statement. "Restaurateurs are making the same tough decisions around their tables that other Americans are making around theirs right now."

In Annapolis, some restaurants are banding together to counteract tough economic times and are working with the Annapolis Business Association to create a weeklong promotion in February.

The ABA is a nonprofit consortium of businesses and entrepreneurs. The organization hopes to enlist about 35 restaurateurs for the promotion.

As of last week, 24 restaurants had signed up to participate in the event.

Erin McNaboe of downtown's Rams Head Tavern volunteered as the chairman of the Annapolis Restaurant Week Committee.

"The idea for this came about, of course, because of the economy and the focus always trying to drive customers to the unique restaurants in Annapolis," Mrs. McNaboe said.

From Feb. 16 through 20, participating city restaurants will offer universal, fixed-price meals, "the same price on the same days," putting each of the venues on an even keel. For that week, patrons will have the opportunity to enjoy a three-course meal for lunch or dinner at any of the participating restaurants.

All lunches will be priced at $15.95, and all dinners will cost $29.95.

Cities like New York and D.C. have popularized the trend of restaurant weeks in the past few years. This will be Annapolis' first attempt at such a promotion.

Mrs. McNaboe said she hopes the idea will reinvigorate interest in dining out.

"I think that everybody is reviewing all aspects of their bills, and where they're spending their money and they're cutting out restaurants because the perception is if you eat at home, you're not wasting any money or any food," she said.

Mrs. McNaboe said with food prices being so high these days, dining out actually can save people money because when restaurants buy in bulk, they can prepare food for less money than if a consumer tried to make the same foods at home.

"If a consumer tried to mimic the same recipes at home, they probably couldn't do it for the same price," she said. "Pick a meal for 10 bucks at a restaurant, go to a grocery store and try to go and make a meal with the same ingredients - you can't do it."

Startups suffer

The climbing prices of ingredients and cooking equipment is staggering, especially for restaurants just finding their feet.

The founders of Punk's Backyard Grill, a startup restaurant that will open in Westfield Annapolis mall at the beginning of the new year, said they've had to constantly reassess their business plan for the venture as prices have fluctuated.

"Well, we have been working on this concept for about two-and-a-half years, before commodity prices started really rising," said Sheila Laderberg, one of Punk's three founders.

The Punk's restaurant concept is to recreate the at-home family grilling experience, with the average customer's check coming to about $11 to $13. Ms. Laderberg said that she and her partners kept a close eye on how food prices would affect the price-point of their menu options.

"We wanted to make sure we kept it in the ballpark of the right price range for our concept, so that meant we'd have to possibly change some of our recipes if certain ingredients were particularly volatile in the market," she said.

But one item they couldn't do without for the Punk's concept is hamburgers. At one point during the summer, the Punk's operators were looking at a 20-percent increase in the price of beef for a three-month period, Ms. Laderberg said.

Many restaurants, whether a new business or an old stomping ground, are waiting for consumer confidence to return so they don't have to even consider sacrificing quality to stay profitable.

The National Restaurant Association reported that many restaurant operators are pessimistic about the direction of the economy, with about 50 percent of those polled expecting their sales volume in six months to be lower than it was during the same period last year.

Though business owners like Ms. Laderberg are excited about the start of a new venture, she is also frank about restaurateurs' expectations for the coming months.

"This current climate is uncharted waters for a lot of people," Ms. Laderberg said. "This has been like you're planning to get married and then you find out it's going to rain on your wedding day."